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May 04, 2011

U.S. Trade Representative Releases Special 301 Report on Global IPR

At the end of last month, the U.S. Trade Representative (USTR), Ronald Kirk, issued the 2011 Special 301 Report. According to the USTR website "[f]ighting [intellectual property rights, i.e.,] IPR theft in overseas markets is critical to the livelihoods of the estimated 18 million Americans who work in intellectual property-intensive industries." The USTR Report "provides a means for the United States to promote the protection and enforcement of IPR," according to the website announcement, noting that "for the first time, USTR has issued an open invitation to all trading partners listed in the report to cooperatively develop action plans to resolve IPR issues of concern." This is part of "a call to action" to all U.S. trading partners that the USTR says it is issuing with this Report. Ambassador Kirk asserts that the U.S. is "ready to work intensively with [our trading partners] to stop intellectual property theft that threatens IP-related jobs in the United States and other countries."

The Report is promulgated pursuant to Section 182 of the Trade Act of 1974, as amended by the Omnibus Trade and Competitiveness Act of 1988 and the Uruguay Round Agreements Act (enacted in 1994). The Trade Representative is required under the Act to "identify those countries that deny adequate and effective protection for IPR or deny fair and equitable market access for persons that rely on intellectual property protection." The Trade Representative has implemented these provisions by creating a "Priority Watch List" and "Watch List." Placing a country on the Priority Watch List or Watch List is used to indicate that the country exhibits "particular problems . . . with respect to IPR protection, enforcement, or market access for persons relying on intellectual property." These watch lists are reserved for countries having "the most onerous or egregious acts, policies, or practices and whose acts, policies, or practices have the greatest adverse impact (actual or potential) on the relevant U.S. products."

This report, on the state of intellectual property rights worldwide, identifies twelve countries on a "Priority Watch List" and another 28 countries on the "Watch List," all relating to deficiencies in intellectual property protection in these countries. The Priority Watch List in the Report lists China, Russia, Algeria, Argentina, Canada, Chile, India, Indonesia, Israel, Pakistan, Thailand, and Venezuela, the same countries that were on this list in last year's Report. Countries on this list "do not provide an adequate level of IPR protection or enforcement, or market access to persons relying on intellectual property protection." On the Watch List this year are Belarus, Bolivia, Brazil, Brunei, Columbia, Costa Rica, Dominican Republic, Ecuador, Egypt, Finland, Greece, Guatemala, Italy, Jamaica, Kuwait, Malaysia, Mexico, Norway, Peru, Philippines, Romania, Spain, Tajikstan, Turkey, Turkmenistan, Ukraine, Uzbekistan, and Vietnam; compared to last year, Lebanon has been removed from the list. Although many U.S. trading partners have acted to implement IPR protection into their national law, the Report "identifies a wide range of serious concerns, ranging from troubling a lack of criminal prosecutions and deterrent sentencing has reduced the effectiveness of IPR enforcement in many regions." This is the result, among other things, of a lack of knowledge of IPR law on the part of judges and enforcement officials, and insufficient enforcement resources," both areas the Report says the U.S. is ready to continue to "work collaboratively" to address.

The Report notes that public response to a Federal Register Notice used to prepare the Report reflected an "enhanced approach to public engagement" in this Report, with the USTR receiving 49 comments (access to these comments is provided at www.regulations.gov, docket number USTR-2010-0037). In addition, 17 witnesses provided testimony at a public hearing on March 2, 2011; these witnesses included "representatives of foreign governments, industry, and non-governmental organizations" (available on the USTR website).

The Report notes some "positive developments" in the past year, including work towards "finalizing" the Anti-Counterfeiting Trade Agreement (ACTA) between the U.S. and Australia, Canada, the European Union, Japan, Korea, Mexico, Morocco, New Zealand, Singapore, and Switzerland; four separate pieces of IPR legislation in Russia relating to the 2006 Bilateral Agreement on Protection and Enforcement of Intellectual Property Rights; and "action" in Spain against copyright piracy on the Internet. In addition to ACTA, the Report cites the Trans-Pacific Partnership Agreement, between the U.S. and Australia, Brunei Darussalam, Chile, Malaysia, New Zealand, Peru, Singapore, and Vietnam; Trade Preference Program reviews such as the Generalized System of Preferences (GSP) program relating to Russia, Lebanon, and Uzbekistan, and regional programs including the Caribbean Basin Economic Recovery Act (CBERA); and bilateral free trade agreements (FTAs) and Trade and Investment Framework Agreements (TIFAs) as efforts in furtherance of greater IPR protection.

The Report contains a section on "best practices" among U.S. trading partners, which include "improved cooperation and stakeholder engagement [related to greater transparency]" in Argentina, Canada, Guatemala, Italy, Malaysia, Mexico, and Pakistan. Efforts in China and Russia to combat counterfeit drugs are commended, and the Report "strongly encourages foreign governments to make [IPR] training opportunities available to their officials." U.S. actions in this regard, including the USPTO's Global Intellectual Property Academy, "which conducts over 75 programs per year, training more than 4,500 participants from over 120 trading partners" are also mentioned, as is the State Department's International Visitors Leadership Program and programs run by the U.S. Copyright Office. U.S. efforts outside the country cited in the Report include agreements between the US PTO and "more than 40 national, regional, and international IPR organizations, such as the Caribbean Community (CARICOM), the Association of Southeast Asian Nations (ASEAN), the African Regional Intellectual Property Organization (ARIPO), the World Intellectual Property Organization (WIPO), the International Union for the Protection of New Varieties of Plants (UPOV), and Interpol, to partner on IPR training activities," and the Department of Commerce's International Trade Association and Commercial Law Development Program. Linking IPR protection with national security, the Report cites the Department of Homeland Security for its customs and border control activities, and training by DHS in Angola, Brunei, Egypt, Mali, Peru, Ukraine, and Thailand relating to IPR.

A significant part of the Report focuses on counterfeiting and copyright piracy, as it has in other years. This area has "evolved," according to the Report, "from a localized industry concentrated on copying high-end designer goods to a sophisticated global business involving the mass production and sale of a vast array of fake goods, including items such as counterfeit medicines, health care products, food and beverages, automobile and airplane parts, toothpaste, shampoos, razors, electronics, batteries, chemicals, and sporting goods." A greater variety of goods are being counterfeited and the counterfeits are more sophisticated, bearing the indicia (such as labels and trademarks) of the originators' goods. Free trade zones have been used as conduits for counterfeit goods, both for assembling and distributing the goods to other countries as well as disguising the origin of such goods. The result in many countries is a loss of tax and other revenue as well as increases in organized crime, which is attracted to the "enormous profits and little risk" involved (both low initial capitalization costs incurred and insignificant penalties imposed). The Report cites as evidence of increased sophistication separate shipment of counterfeit goods and their labels, wherein "unbranded products" are imported, packaged with counterfeit trademarks and packaging material, and then exported; Russia, Paraguay, Mexico and the Philippines are cited for such practices. Another "growing" problem is counterfeit pharmaceuticals, either final drug product or active pharmaceutical ingredients (API); Brazil, China, India, Indonesia, Lebanon, Peru, and Russia are cited as countries where the former type of counterfeiting is a problem and China is cited as being a "major source" of counterfeit APIs.

Another section of the Report is concerned with digital piracy, particularly over the Internet, facilitated by "[t]he increased availability of broadband Internet connections around the world." This is a "significant concern" in Brazil, Canada, China, India, Italy, Russia, Spain, and Ukraine, involving specifically "unauthorized retransmission" of sporting events. The Report cites improved technologies, including "mobile telephones, tablets, flash drives, and other mobile technologies" as exacerbating these problems, with some mobile devices being sold with "preloaded" illegal content in some countries. In addition to the traditional objects of counterfeiting (such as music and movies), counterfeiting is beginning to be a problem for "ring tones, 'apps', games, and scanned books." Countries where the U.S. "seek[s] to work" with local authorities to address this form of piracy include Argentina, Belarus, Brazil, Brunei, Canada, Colombia, India, Italy, Malaysia, Mexico, Philippines, Romania, Russia, Spain, Thailand, Turkey, Ukraine, Venezuela, and Vietnam.

As it has for the past few years, the Report contains a section on "Intellectual Property and Health Policy," again specifically mentioning the 2001 Doha Declaration on the TRIPS Agreement. The Report states that the Declaration "recognized the gravity of the public health problems afflicting many developing and least-developed countries, especially those resulting from HIV/AIDS, tuberculosis, malaria, and other epidemics," and that the U.S. "respects a trading partner's right to protect public health and, in particular, to promote access to medicines for all, and supports the vital role of the patent system in promoting the development and creation of new and innovative lifesaving medicines." Accordingly, the Report states that the U.S. "respects our trading partners' rights to grant compulsory licenses in a manner consistent with the provisions of the TRIPS Agreement, and encourages its trading partners to consider ways to address their public health challenges while maintaining intellectual property systems that promote investment, research, and innovation." On the other hand, the Report contains a section relating to the USTR's efforts to "reduce market access barriers faced by U.S. pharmaceutical and medical device companies in many countries," specifically calling out Algeria, Finland, Germany, Greece, Indonesia, Japan, Korea, New Zealand, Poland, and Taiwan as countries of particular concern in this regard.

The Report contains in a final section a review of U.S. activities in the WTO to resolve disputes with countries such as China and the EU over trade issues.

Section II of Report is a detailed, country-by-country discussion for each country on the Priority Watch List and the Watch List, relating to the activities (or lack thereof) of each country that results in placement of that country on these lists.

The U.S. Trade Representative Report provides insights into both the concerns of U.S. IP rights holders and the Administration's intentions to work with, cajole, coerce, or threaten other countries to increase protection for IP rights of U.S. IP rights holders. This year, the Report includes an invitation to U.S. trading partners for coordinated efforts in enforcing IPR:

USTR is pleased to announce a new initiative in the 2011 review, whereby it invites any trading partner appearing on the Special 301 Priority Watch List or Watch List to negotiate a mutually agreed action plan designed to lead to that trading partner's removal from the relevant list. . . . Through action plans and other engagement in the coming year, USTR looks forward to working with U.S. trading partners to address both emerging and continuing concerns, and to building on the positive results achieved thus far.

This initiative indicates that the attitude is one of cooperation against a common enemy (i.e., counterfeiters) rather than punitive action by the world's trade leader against foreign competitors. In the past, the U.S. and other Western governments have been frustrated, particularly with regard to pharmaceutical products, in implementation of international trade treaties designed to increase IP rights protection. This Report seems to indicate that the Administration now believes that achieving the goal of greater IPR enforcement and protection is better served by trying to convince our trading partners that such actions are in their best interest as well as ours. In view of past failures, it seems that this change in orientation may be the best option; its success no doubt will be a topic in next year's Report.

For additional information regarding this and other related topics, please see:

Comments

If you own a patent, but you do not use the patented invention in a product or service, you are still entitled to enforce your patent. You are known in the world of patents and patent enforcement as a "non-practicing entity" or "NPE" -- or more rudely put, a "patent troll."